PMOProject Management OfficeProject Risk ManagementRisk Mitigation

The Biggest Risk

If we follow the logic that the biggest risks in an organization are the ones that represent the greatest cost, it stands to reason that the largest risk for an IT organization is its’ staff. A recent Northwestern study posted at says that employee salary currently represents approximately 76-81% of the total budget for an IT shop. On top of already being a huge cost, employees are an area that is guaranteed to continue to cost an organization more (unless you want to lose them) in the form of merit raises and general cost of living increases.

It’s interesting that a line item of that size on a budget gets as little attention as it does. A 2009 publication in Management Learning noted that employee training (in particular, training for managers, who typically represent the greatest potential impact on project success or failure) is a miniscule portion of overall budget. It’s hard to say what you should spend on mitigating any risk, but most models I’ve used take into account the financial impact, likelihood to occur, and cost of resolution when informing how to mitigate a risk. Even if you say that poor employee performance and knowledge has a minimal chance of occurring – at that percentage of a budget, most models will still encourage you to devote around 4% of budget to training.

The industry average in IT is around 2.5% as far as I can tell. It gets worse, because most companies who do spend money on training do it without any kind of meaningful plan. Sending staff to popular training events and conferences is great, but if it’s only being done to meet a quota, it’s unlikely to be beneficial (and even if it is, how will you know, since you have no objectives to measure against?).

Employee evaluation, training, and advancement need to be a central part of the risk management process for any IT project. While it is easier said than done, ongoing assessment of associate confidence in their ability to perform their work, along with frequent evaluation of employee morale, can point you to the biggest opportunities for training and performance improvement: you can see who the best candidates are, what they need the most, and make logical assumptions about the most motivated individuals who will try to get the most out of training.

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